National Oil Corp 'makes £1.5bn bid for Dana Petroleum'

Friday 2 July 2010 07:25 BST

State-run Korea National Oil Corp has made a £1.5 billion takeover approach to Britain's Dana Petroleum, a source said, as the firm, armed with a $6.5 billion warchest, battles for energy resources with China.

Dana Petroleum said late yesterday that it had received a preliminary bid approach. Sources this morning said the talks were at early stages.

"We had approached Dana but no concrete progress has been made," said the KNOC source, who did not want to be identified due to the sensitivity of the issue.

KNOC, with a mission to more than double South Korea's oil reserves this year to 300,000 barrels per day, has said it wanted to complete a major deal in the first half of the year but has failed to do so.

"KNOC's been basically looking at all assets in the market, but it seems uncomfortable with bidding right now, as asset prices have hiked quite a lot," said a Seoul-based senior banker.

"KNOC has no funding problems... But the firm seems simply pressured with no deal so far this year."

It lost out to China's largest oil refiner Sinopec in a $7.24 billion deal for Swiss oil explorer Addax Petroleum.

Its last major deal was a $335 million purchase of Kazakh oil developer Sumbe late December, beating Sinochem. That followed a $1.7 billion buy in October of Canada's Harvest Energy Trust in the country's biggest energy investment.

With the BP oil disaster in the Gulf of Mexico still unresolved, some analysts say the industry's focus in mergers and acquisitions may shift to assets in Africa and Asia.

"We are aiming to acquire some stakes in oil fields either in Africa or South America. Our initial plan was to buy within the first half of this year, but now a deal is likely by the end of the year," the KNOC source said.

Dana has proven and probable reserves of 223 million barrels of oil from 36 oil and gas fields in such regions as Egypt, the North Sea and Morocco.

Shares in Dana closed up 3.7 percent at 1,177 pence on Thursday. The shares rose sharply last week on market speculation that Austrian oil and gas group OMV was interested in the firm, which an OMV spokeswoman denied.

South Korea, the world's No.5 oil and No.2 liquefied natural gas (LNG) importer, plans to make a record spending of more than $12 billion in overseas energy and resources deals this year.

This will be led by KNOC with spending of more than $6.5 billion to add between 50,000 and 100,000 barrels of oil production per day.